Correlation Between Reinsurance Group and Fast Retailing

Can any of the company-specific risk be diversified away by investing in both Reinsurance Group and Fast Retailing at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Reinsurance Group and Fast Retailing into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Reinsurance Group of and Fast Retailing Co, you can compare the effects of market volatilities on Reinsurance Group and Fast Retailing and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Reinsurance Group with a short position of Fast Retailing. Check out your portfolio center. Please also check ongoing floating volatility patterns of Reinsurance Group and Fast Retailing.

Diversification Opportunities for Reinsurance Group and Fast Retailing

0.04

Correlation Coefficient

Reinsurance Group  Fast Retailing

Significant diversification

The 3 months correlation between Reinsurance and Fast is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Reinsurance Group of and Fast Retailing Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fast Retailing and Reinsurance Group is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Reinsurance Group of are associated (or correlated) with Fast Retailing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fast Retailing has no effect on the direction of Reinsurance Group i.e., Reinsurance Group and Fast Retailing go up and down completely randomly.

Pair Corralation between Reinsurance Group and Fast Retailing

Assuming the 90 days trading horizon Reinsurance Group of is expected to generate 0.71 times more return on investment than Fast Retailing. However, Reinsurance Group of is 1.41 times less risky than Fast Retailing. It trades about 0.25 of its potential returns per unit of risk. Fast Retailing Co is currently generating about -0.27 per unit of risk. If you would invest  19,900  in Reinsurance Group of on October 12, 2024 and sell it today you would earn a total of  1,500  from holding Reinsurance Group of or generate 7.54% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	94.44%
Values	Daily Returns

Reinsurance Group of  vs.  Fast Retailing Co

Reinsurance Group

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Reinsurance Group of are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Reinsurance Group may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Fast Retailing

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fast Retailing Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Reinsurance Group and Fast Retailing

The main advantage of trading using opposite Reinsurance Group and Fast Retailing positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Reinsurance Group position performs unexpectedly, Fast Retailing can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Fast Retailing will offset losses from the drop in Fast Retailing's long position.

The idea behind Reinsurance Group of and Fast Retailing Co pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

Check out your portfolio center.

Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.